March 19 (Bloomberg) -- Colombia’s peso posted its longest
streak of losses since November as speculation mounted that the
central bank will increase dollar purchases in the foreign-exchange market to stem the currency’s gains.

The peso dropped for a fourth day, depreciating 0.2 percent
to 1,811.72 per U.S. dollar at the close of trading in Bogota.
It gained 9.7 percent in 2012 and touched a 17-month high on
Jan. 2, prompting policy makers to increase dollar purchases in
the foreign-exchange market. The currency has since weakened 2.7
percent.

Policy makers may increase dollar purchases as part of an
effort to weaken the peso and help exporters, central bank
Governor Jose Dario Uribe said in a March 16 interview in Panama
City. President Juan Manuel Santos asked policy makers on March
14 to find new ways to ease the currency’s rally.

“External markets have been weighing down on the peso,”
John Jairo Ramirez, a fixed-income analyst at brokerage Bolsa y
Renta SA, said in a telephone interview from Medellin. “The
central bank might also announce increased dollar purchases or
at least an extension to its program” at its March 22 policy
meeting, he said.

Banco de la Republica will buy about $3.5 billion in the
foreign-exchange market from Jan. 1 through May 31 after
purchasing more than $4.8 billion last year, Uribe said.

The peso also fell as emerging-market assets retreated
after Cyprus’s parliament rejected an unprecedented levy on bank
deposits, dealing a blow to European plans to force depositors
to shoulder part of the country’s rescue in a standoff that
risks renewed tumult in the euro area.

Interest-Rate Outlook

Yields on Colombia’s peso bonds due in May 2014, the
benchmark for securities with shorter maturities, rose three
basis points, or 0.03 percentage point, to 3.82 percent.

Banco de la Republica will lower the overnight lending rate
by a quarter-percentage point to 3.5 percent on March 22,
according to the majority of analysts surveyed by Bloomberg.
Policy makers have cut benchmark borrowing costs 1.5 percentage
points since July as growth cooled and inflation slowed below
their target.

With annual inflation at 1.83 percent, the lowest level
since the 1950s, Colombia has room to keep cutting interest
rates, Finance Minister Mauricio Cardenas, who is also president
of the central bank’s board, told reporters March 15.